A Fistful of Pennies Brings In Bucks
Southern Californians are realizing the value of pennies forgotten in desk drawers and those darned nickels wedged in car seats.
To be exact, Angelenos who shop at Hughes, Ralphs, Food 4 Less and Lucky grocery stores dug up and cashed in roughly $15 million worth of pennies, dimes, nickels and quarters in the three months ended Oct. 26. That’s based on 373,396 transactions averaging $40 each.
The coins were collected and tallied by Coinstar Inc., a company that entered the lucrative Southern California market in a big way this summer when it installed its self-service coin-counting machines in 230 Ralphs stores.
The machines, part of the 6-year-old company’s largest chainwide installation to date, joined those already in place at 58 Hughes stores, nine Lucky venues and 50 Food 4 Less outlets in Southern California. (The company conducted test runs with its machines here starting in December 1994.)
Executives of the privately held company had looked forward to a move into the largest grocery store market in the country, said Jens Molbak, founder of the Bellevue, Wash.--based firm.
“Los Angeles is a big deal because of the sheer size of the market in terms of the number of people and the volume of coins available,” Molbak said. “It’s bigger than Texas--and everything is big down there.”
Coinstar makes its money by collecting a share of each dollar a customer puts into the machines. It charges 10 cents per dollar for pennies, five cents per dollar for nickels, dimes and quarters. The machines issue a paper voucher for the remaining value of the coins, which the user can redeem in the store for groceries or cash.
Coinstar has its largest concentration of machines in the Los Angeles area for good reason. The 347 machines here do more volume than the 900 or so other units the company has installed in grocery stores in 18 states, Molbak said.
It may not have the Los Angeles market to itself for long, though. In six months, a local start-up known as CoinBank Automated Systems Inc.--a subsidiary of Cash Technologies Inc. of Los Angeles--plans to place 300 of its coin counters in selected branches of Home Savings of America, Southern California Savings, Union Bank, Coast Federal Bank and Downey Savings. The company is testing about two dozen machines here.
Coinstar is exploring the feasibility of placing its machines in banks in Los Angeles too, said Art Merrick, a spokesman for the company, which plans to exhibit the machines at a banking trade show next week.
Coinstar’s green and yellow machines can process about 600 coins a minute. Users dump change into a metal tray under a computer screen that displays instructions and does the tallying. Along with their vouchers, customers get grocery coupons, which manufacturers pay to have dispensed.
Coinstar doesn’t pay grocers to let them install its machine in their stores. Instead, store operators hope the service will increase sales by attracting more customers. Ralphs says the machines are part of an effort to provide a one-stop shopping experience.
It took Coinstar technicians five years to perfect the machine, which marries ATM-style computer software and Las Vegas slot machine technology. It includes a computer, a modem, a video screen and a printer. The sorting and counting equipment had to be sensitive enough to kick out key chains, foreign coins and even lint, Molbak said.
Coinstar services the machines, which use an online network to alert technicians to problems and to tell them when it’s time to empty the coffers. An armored-car service collects the coins and takes them to area banks for processing. Coinstar wouldn’t say how much each machine costs, but Molbak said it’s about that of an ATM, which typically runs between $25,000 and $50,000.
The technology has been well-received by Southern Californians. Users are often surprised by how quickly their spare change adds up, Molbak said. “Our average transaction results in the customer collecting between $30 and $50 in newfound cash,” he said.
In fact, the two largest transactions in Coinstar’s history have taken place in Southern California. The first occurred in May when a customer hauled 22,500 coins into a Hughes market in Burbank and redeemed them for $4,612 in cash.
The second, which remains the firm’s largest transaction to date, took place in August when someone lugged $8,105 in coins into a Ralphs in San Dimas. Including those transactions, Coinstar has collected about 2,000 tons of change from its Southern California machines during the last two years.
The company sees an enormous market for its service--about $140 billion worth of coins are handled by Americans each year. Coinstar hopes to eventually have 15,000 machines around the country.
